Software developers, wireless vendors and business information suppliers rank as some of the most likely targets for acquisition in 2006, according to a report by PwC.
The market watcher questioned 149 technology executives to determine the effect of digital convergence – the bringing together of computer, phone, recording and broadcasting technologies within an all-digital environment – upon corporate consolidation in the IT industry.
Bill Cobourn, global technology industry leader at PwC, said: “Companies are under increasing pressure to gain footholds in digitally related industries and markets. Executives see mergers and acquisitions as a means of capturing entire beachheads.”
About 64 per cent of those questioned expected the current consolidation trend to continue over the next three years. Specifically, 49 per cent thought software developers were the most likely targets for acquisition, while 40 per cent thought business information suppliers would also be strong targets.
The survey also discovered that 52 per cent of respondents claimed to prefer alliances to mergers and acquisitions as a means of gaining market penetration. Only 28 per cent viewed mergers and acquisitions as their preferred method.
Of those questioned, 46 per cent believed that digital convergence revenue was most likely to be generated when an alliance or partnership was created.
“Due diligence and analysis of
what each party brings to the table will help executives determine if
they should pursue mergers and acquisitions,” Cobourn added. “Or if
an alliance or partnership will meet their needs.”
Duncan Davies, mergers and acquisitions manager at VAR TSG, which has made 18 acquisitions since its inception in 2003, told CRN that mergers, acquisitions and partnerships benefit the channel and help to sort the wheat from the chaff.
“A partnership gives many of the benefits of an acquisition, but
without all of the risks,” he said. “Acquisitions tend to be preferred in well-known markets that are also well established.”
According to figures from the Office of National Statistics, the number of acquisitions made by UK companies decreased by 10 to 76 between the third quarter of 2003 and 2004. The number of acquisitions by foreign companies into the UK increased by 19 to 55 (CRN, 7 November).
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